EU Foreign Policy Chief Wants Iran Clearing House Open Before November

Speaking on Wednesday, EU foreign policy chief Federica Mogherini offered additional comments on the “special purpose vehicle,” or clearing house, that the EU is establishing to allow companies to trade with Iran without having to transfer any money internationally, or do any international banking that the US might threaten.

The US responded angrily to the news that the clearing house is being established, and that both Russia and China will be included in the system as well as EU countries. US officials have said they won’t allow the EU to defy their sanctions, though it isn’t clear they have any legal recourse in the matter.

The clearing house is intended to allow EU and other countries to import Iranian oil, but the money for that oil into the clearing house, and then for Iran to use that money to pay other foreign companies for goods and services provided to Iran. With no money crossing borders, US banking sanctions will not apply.

What the EU has done here is basically recreate the Arab money transfer method called hawala. One Arab (X) deposits money with a local hawala broker (B) in his country. Then B contacts a hawala broker (C) in another country and tells him the money is on deposit with B. Arab X then orders goods in that country from Arab (D) in that country. D is then paid for the goods by C. No money changes hands between X and D at that time. Later broker B settles the debt with broker C, perhaps by exchanging goods or services or even employees. No bank transactions are involved and the system can be used to bypass official exchange rates as well as being essentially invisible to government control.